Referral Marketing is the process of gaining new customers and building your brand through recommendation from your existing customers or brand enthusiasts. There are plenty of ways that referral marketing can happen and we shall explore some of the simplest ways to increase your customer reach.
Referral marketing happens when an existing customer or consumer of your product shares their experience or recommends your brand or service to someone they know. This recommendation can be a friend or neighbour, family member or colleague, but most often it is someone local to them and this is a great way for a business to leverage existing customers to attain new ones.
Have you noticed that when one person in the street gets their windows cleaned, or gets building work done by a particular company or local business, then the neighbours often copy suit? This is referral marketing in action and it can be a conscious action to share, but often it happens subconsciously, and you may not even notice the referral has happened at all.
Building your brand can be difficult to start and having a way to increase the number of referrals is a great strategy for building your customer base and reaching more people.
Referral marketing is still responsible for more than 70% of business growth globally. This means that spending money on advertising and marketing may not return as much growth as a simple recommendation, so let’s look at why referrals are such a good way to grow your business:
1. Trust
A recommendation from a friend or family member is highly trustworthy. We are much more likely to use someone that’s been recommended by someone we know, and extensive studies have shown that referred customers are 4 times more likely to buy from you a second time. This is partially due to an inherent need to remain consistent with the recommendation from their trusted friend.
It’s easy to dismiss a well rehearsed pitch from a salesman, but it’s almost impossible to ignore a recommendation from a friend or family member.
A Neilson Trust Study showed that referrals are the most trusted form of advertising by a large margin.
2. Referrals are precise
Marketing to the general public requires a very wide broadcast to find your next customer. This can lead to expensive advertising campaigns and lots of effort building a brand.
About 10 years ago my wife started a driving school and we did a flyer campaign in our local area. We delivered over 500 flyers to every house in the area and didn’t get a single customer off the back of it. Why, because the marketing was not precise enough.
The odds of canvasing to the particular client base we were looking for were tiny and this proved to be a massive waste of effort. It’s a much better idea to have someone refer you to a friend who needs your service. Referrals mean that your customers are doing the marketing work for you.
Referral and word-of-mouth marketing tend to be much more targeted because people tend to know their friends and social audiences pretty well. This allows your brand message to spread more effectively than with most other marketing channels.
3. Shareable experiences make for referrals
When we buy a product from Amazon we can brag and boast about the great thing we just bought, and that is an effective referral system for both Amazon, as a platform to buy products, and the seller, that has a product being shared. People like to share their experiences. This is known a humble-brag. A Harvard met-analysis, “Disclosing information about the self is intrinsically rewarding”, found that the act of the humble-brag had the same cognitive mechanisms associated with a reward. The study showed that people were actually willing to forgo money in order to disclose information about themselves. This implies that there is great value in creating the opportunity for your product or service customers to be able to brag about using the service, so much so, that they are willing to do it without reward, with maybe just a little nudge.
Having a way to allow local customers to brag about your service is an effective way to generate referrals and people will actually want to share in order to feel good about themselves.
4. Make It Easy for Customers To Refer Your Brand
It’s very important that it’s easy for customers to refer your service or brand. The modern information driven world is a place where people talk less and share more, so having an easy way to allow the Millennial and Z Generation to share your business is key to increasing reach and building customers. It’s not advisable to ask someone who has not used your product or service to recommend it, so the simplest and most timely way to seek a referral is at the point of payment. This should be done as soon as possible after the transaction has been completed and should be combined with a simple feedback mechanism.
Someone will only share or refer your business publicly if it makes them look good so it’s a good idea to have a way to allow customers to look and feel good about sharing your product or brand. It needs to appeal to their internal need for reward and recognition. Any difficulty in referring your brand will also be an obstruction to sharing, so the referral request needs to come at a natural point in the transaction and be very simple to action.
5. Reviews are the best referrals.
People trust the feedback from real customers and star ratings and feedback comments are an essential tool in developing customer trust and positioning your brand and service against competitors.
Having a simple tool that allows customers to feedback and rate your brand or service is a very important referral mechanism. Most E-Commerce sites have feedback and 5-star ratings and when buying a product online I would always check the reviews.
When you operate a local business offering services and having a small pool of customers, its currently nearly impossible to get referrals through customer reviews.
Nubilo has a solution to this problem in the form of organic feedback and referrals built into its digital invoicing system.
You can send invoices and track payments automatically, and after payment a customer is gently ask for feedback and to refer your business with several options. Users can provide a 5-star rating on the service they have received and provide feedback. They can then share or send your business page to a friend.
By having a stylish Nubilo business page, your business can look its best and your customers will want to refer you as a humble-brag.
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